So how can you know the market direction?The difference between a bull and a bear marketA bull market has sharp corrections and long gentle rallies. A bear market has long gentle trending falls with sharp rallies.
This means in a bull you can “buy the dip” but in a bear your losses come from the constant ‘drip drip drip’ of falls, not the plummets that grab headlines.When a market is drifting off and suddenly you get a sharp rally, you should be very careful not to be suckered in. Likewise, in a bull market a sharp correction shouldn’t sucker you out of a stock or tracker.
More importantly still you can determine the difference between bull and bear by the direction of the sharp moves and the drift. If you’re brave you can even divine a change from one to the other from those actions. Right now we have just experienced a sharp rally in what is an obvious bear market. While many will get FOMO and jump in, if you follow the above logic you are expecting the consistent falls to begin.
It won’t be until the bear trend is broken and the market takes a new calm direction that the market will have entered a different long term path.As far as today’s setup goes, it remains in the bear market trend. You have to be a huge optimist to see a big rally ahead and not much of a pessimist to see a big fall in the works. However, as all you need to know is which way the market is going, you can lean on the shape of the trend to know if it’s up, down or even sideways.
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